British exporters sending goods to far-flung destinations in the coming days risk being locked out of harbours around the world as a no-deal Brexit looms, business leaders have warned.
Independent trade experts and the UK’s biggest business groups said exporters could be dispatching goods from UK ports imminently that would not arrive until after the 29 March deadline. This raised the prospect of goods being stuck in ports or facing hefty additional costs in the event of a disorderly Brexit.
The warning came as the Bank of England warned the UK economy was on course for its weakest year since the global financial crisis, as evidence suggested Brexit jitters were spreading.
It also emerged on Thursday that civil servants drafted a radical series of economic policy options after the 2016 Brexit referendum, which included slashing regulation, cutting taxes and removing tariffs. The cross-Whitehall work, known as Project After, first reported in the Financial Times, was then shelved when the government decided to reject the idea of a “race to the bottom” on rights and standards, government sources said.
But as the likelihood of a no-deal Brexit grows, some ministers and officials have returned to the work in search of emergency levers to pull in the event of a downturn, the Guardian has been told.
In the latest sign of the mounting disruption, several business groups – the CBI, the EEF manufacturers’ group, the British Chambers of Commerce (BCC) and the British Retail Consortium (BRC) – warned separately that goods shipped from as early as this weekend might not arrive in time to beat the 29 March deadline, given the length of shipping times in world trade. The maximum shipping time to anywhere in the world is about 50 days – with the furthest being Australia and New Zealand – meaning shipments sent over the next few days to far-flung ports face an uncertain reception.
Ben Digby, the CBI’s international trade director, said: “There are ships that are setting sail from the UK today that will have to weather a thick extra fog of uncertainty on the high seas, as they could arrive in port effectively locked out of the very market they have travelled across the world to get to.”
He warned that whisky going to South Korea could risk having to wait in its destination harbour until the situation became clear. As much as £71m of bottles are shipped to Korea each year, with the potential for 20% tariffs to be slapped on bottles should they not arrive in time.
The UK exports roughly £5bn worth of goods a month, on average, to the 60 countries that have free trade agreements with the EU. The EU and the countries it has trade deals with cover about 32% of global GDP.
As an island nation, about 95% of all goods by weight enter and leave the UK through ports across the country, with almost 500 million tonnes handled each year. EU traffic accounts for about 55% of all trade.
Seamus Nevin, the chief economist at the EEF, said: “These problems don’t just start on 29 March. It takes several weeks for container ships to travel from the UK to East Asia, Oceania, or South America. Very soon, sea-freight will be leaving the UK with no idea of the trade rules that will be in place when the goods arrive.”
The situation has parallels with the US-China trade dispute last year, when US ships raced across the world to deliver soybeans before Beijing could impose tariffs on them. Some boats were stuck in harbours after failing to beat the deadline.
Greg Clark, the business secretary, said on Wednesday that the real deadline for averting no-deal Brexit was much closer than 29 March, due to the amount of time businesses need to ship goods.
Speaking in front of the parliamentary business select committee, he said firms shipping goods to Japan needed six weeks’ notice to make decisions. He added: “People often say these things at the last minute. The last minute for important exporters is fast approaching over the next few days and weeks.”
Industry insiders said they hoped that countries would show leniency and continue to accept shipments of British goods after the deadline. They warned, however, that these might come with higher tariffs set under World Trade Organization rules, which would be higher than existing arrangements.
Hannah Essex, a co-executive director of policy at the BCC, said it was unclear what would happen: “Traders trying to fulfil orders now are still in the dark about what will happen to their goods when they arrive at destinations around the world in a matter of weeks.”
Lesley Batchelor, the director general of the Institute of Export and International Trade, said most countries would want to continue trading, but added: “If I was a shipper, I would not ship anything knowing this was going on without checking what was happening.
“If it’s a deal and we have transition, it’ll be fine. It’s really just no-deal talk that’s scaring everyone.”
Imports to Britain may also be affected. William Bain, the Brexit policy adviser at the British Retail Consortium, warned that clothing and textiles from Turkey are set for tariffs rising from zero to an average of 12% in a no-deal scenario, while higher tariffs could also be imposed on berries and fruits from Mexico, bananas from Central America and potatoes from Egypt.
“Ultimately it is the consumer who will face higher prices, or reduced availability, as a result,” he said.
The problems for seabound trade apply to several countries which the UK currently trades with under existing EU free trade deals – as part of Britain’s membership of the bloc. These free trade agreements could be lost under a no-deal scenario.
Trade officials are rushing to secure deals with these countries to roll over the existing agreements, although the government conceded to business leaders at a private meeting on Wednesday that most of them won’t be ready in time.
Lack of clarity over the UK’s trading relationship with the EU has held up progress, one attendee at the meeting told the Guardian, including with major countries such as Canada, Turkey, Japan and South Korea. Changes to the UK-EU backstop deal – a key dividing line between London and Brussels – could further delay progress.
“People were saying we’ve got customers expecting delivery in April and under what terms can we send goods to them? The problem is the uncertainty over the future UK-EU relationship, and time is just running out,” they said.
A spokesperson for the Department for International Trade said it would not comment on the private meeting, but that the government was continuing to prepare for all eventualities.
The spokesperson said: “We are making good progress on securing deals and have signed agreements with Chile, the Faroe Islands, and Eastern and Southern African Economic Partnership Agreement states. We have mutual recognition agreements with Australia and New Zealand, and expect others to follow soon. We have also agreed the text of a trade agreement with Switzerland, which the government expects to sign shortly.”
